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Home Front: Apartment owners, renters in area spared housing market chaosBy Jim Wasserman -- Bee Staff Writer Published October 17, 2008 Here's to 800 square feet of serenity: two bedrooms, one bath and a houseplant on the balcony. As the single-family home market reels from falling prices, home-builder bankruptcies and thousands of foreclosures, the apartment sector remains calm. Rare are stories of repossessed apartment complexes forcing renters out onto the streets. "To date, there have been almost no foreclosures on U.S. apartment buildings," according to Caroline Latham, owner of Novato-based RealFacts, which tracks the apartment industry nationally. Although it's true that values are falling alongside those of conventional homes, apartment occupancy and rental rates here and across the United States have held steady. That's enabling apartment owners to ride out the foreclosure crisis that's smacking homeowners. Some now say that apartment owners are like the bankers who avoided risky lending during the housing boom and today look like geniuses. "The standard of investment lending (for apartment houses) was to put at least 20 percent down. None of this 'nothing down,' " says Latham. "You had to be able to show how it was going to (generate) cash flow enough to pay off the loans." As a result of the stricter standards, she says, "Nearly everybody has a good loan on their apartment complex." In the capital region, apartments still generate a dependable source of revenue. RealFacts' most recent quarterly data, for July, August and September, show average rents at large complexes in the Sacramento area up 1.4 percent from a year ago. The average rent in El Dorado, Placer, Sacramento and Yolo counties for those apartment complexes combined was $974 a month. The firm's survey showed occupancy fell nearly 1 percent across the past year, to 93.7 percent. Most complexes usually don't raise rents until occupancy reaches 96 percent. That's a far-off dream now. The supply of competing single-family house rentals is still growing, says Janet Regan, the broker with Fair Oaks-based Horizon Properties, who manages 450 rental homes for clients. Investors are buying bank repos and renting them out, she says. Homeowners who left the region but can't sell their homes are renting theirs, too. "They don't have them on the market because the market is horrendous," Regan says. Sacramento's combination of flat rents and excess supply has apartment builders largely avoiding the region, says Dean Bagneschi, member of TRI Commercial's Apartment Advisory Team. He says investors are also uncertain about this market, given tight credit conditions. "If you're looking to buy an apartment building now, it could easily be a 40 percent down payment," he says. A final note: The availability of apartments for well-off renters is a different story for those struggling nearer the bottom of the pyramid. Less expensive apartments that cater to low-income residents are packed, say those who track that market segment. Occupancy is 96.4 percent at 319 complexes surveyed monthly by Sacramento Self Help Housing. Seventy percent of those complexes will not accept tenants with previous evictions and almost half won't touch people with a spotty credit history. "That's competitive," says John Foley, the housing group's executive director. Not much of a party expectedEvery November, the home-building industry gathers its members in downtown Sacramento to celebrate their fortunes, or lament the lack therof. The last two years, the North State Building Industry Association's annual gathering has been pretty downcast.Indeed, last year's was held on Nov. 1, 2007, when the Dow Jones industrial index fell 280 points to 13,567. Speaking to his colleagues that day, David Hill, executive chairman of Chicago-based Kimball Hill Homes, which has developments in the capital region and Stockton, said: "We're still scared." Six months later, his company filed for bankruptcy protection. Now comes this year's annual gathering Nov. 6 at the Hyatt Regency hotel. This time, builders will hear from Jeffrey Mezger, chief executive of Los Angeles-based KB Homes, one of the Sacramento region's top-selling builders. Also on the program is Edward Leamer, director of the UCLA Anderson Forecast. His specialty: the national economy. Just guessing here: It'll be an afternoon quite different from those in 2003 and 2004. Free advice on home buyingEarlier this week we quoted Yale University finance professor Robert Shiller saying that our economy would be better off if low-income people had access to free, government-subsidized financial advice. Shiller said most of the home-buying advice to that population is often biased, coming from real estate pros aiming to make a sale. In his view, if lower-income people had solid financial advice, the country's subprime mortgage meltdown would never have happened.It turns out people can get free financial advice from the Sacramento Mutual Housing Association. Tara McCall, a SMHA staffer, conducts six two-hour sessions that explain how to finance long-term assets, such as a house, that are often a "key to eradicating poverty and improving your status." Classes explain credit scores, managing debt and saving money. They also emphasize one of the critical pieces of personal finance: the power to say no. "Some people sit down across from a loan officer and feel that once they sit down, they're obligated to go forward," says McCall. Not so, of course. Multiply that knowledge by millions, says Shiller, and we may never have become familiar with the term 'subprime.' For more information on SMHA's classes: (916) 453-8400. About the writer: The Bee's Jim Wasserman can be reached at (916) 321-1102 or jwasserman@sacbee.com |
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Boost Your Rental Cash Flow! Avoiding Landlord-Tenant Disputes Foreclosure's Impact On Tenants Renter's Insurance To Fit Your Needs Deductibility of Refinancing Charges Submit Repair Requests To Your Landlord Avoid Home Rental Fraud Tax Withholding for California Non-Resident Landlords April 24, 2009 Apartment owners, renters in area spared housing market chaos October 17, 2008 Overbuilding, housing foreclosures create glut April 20, 2008 Housing crisis -- no end in sight August 26, 2007 |
July home sales hit 11-year low August 12, 2007 Surplus homes help keep area rental rates low October 19, 2006 Region is due for rent increase June 6, 2006 Region's rental market stagnant for a third year April 20, 2006 Fevered growth cools in Roseville, Elk Grove May 2, 2006 Bill to let landlords reject sex offenders April 25, 2006 Rental vacancy rate up in area January 20, 2005 Population boom in the Valley January 19, 2005 |
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